Investment Advice

[Lindabro]

Morning Folks,

No subject matter has ever brought out so many different opinions, not even politics......

If I had inherited a large sum of money (say a Million) what would be the best thing to do long term?
Advice so far:
From the bank - pay in to reduce your house bond
From my Broker - Invest in Discovery "Something/Something" (Obviously he is a Discovery Broker)
From a friend who works in finance - Pay half into your bond and invest the other half in high risk Allan Gray "Something"
Very wealthy friend - buy Gold, Loads of coins and shares
Another wealthy friend - Invest in reliable long term shares or IT
Another wealthy friend - use full amount and buy a small rental unit in a complex
Another wealthy friend - put it into joint property venture in the UK
Another wealthy friend - invest in "short-something" overseas currencies like the Yen?
There are a number of other suggestions, but for the first time no-one I know agrees.

Obviously the "Something" means I do not remember the term for the investment and I am NOT financially savvy at all.

I thought it would be an easy question, but I am now more confused than ever....
I am sure there must be some independent financial brokers here not aligned to Discovery etc. What do the experts here think?

Thank you
Linda

 

[Scooby_Doo]

If you are looking at 10, 15, 20 years...

Invest directly off shore via a high equity ETF like the S&P 500. Simple, clean and no admin.

You could pay off bond but the property market is **** and that is not going to change for a while.

 

[Affieplaas]

Depends on your financial situation. Here is what I would do:

Scenario 1) If you live from month to month with little to no savings, I would keep the equivalent of 4 to 6 month's monthly household expenses in a "high" interest bearing money market account. Currently most banks offer anything between 3% and 4% and if you can get more from places like Tyme bank (but it does have some T's & C's to consider). The rest I would deposit into my bond. Prime rate is currently 7% and your mortgage interest rate may be anything between 7% and 10% depending on the rate that the bank gave you. Very few risk free investments at the moment will give you a post tax return of 7 to 10%.

Scenario 2) If you have some savings and your debt is under control, I would invest either in some or other offshore investment via an ETF or unit trust. So you have the possibility of dual growth on your funds via the increase in the value of the underlying company's shares as well as forex hedging should the Rand devalue against the Dollar/Pound/Euro/Yen. Some of these unit trusts like Sygnia's Fourth Industrial Revolution Fund has returned gains in excess of 15% year on year.

Scenario 3) You are money's boss, you have so much that you don't know what to do with it. Take the funds offshore and invest it in high risk shares like Telsa.

 

[Rumple4skin]

If I had inherited a large sum of money (say a Million) what would be the best thing to do long term?
Advice so far:
From the bank - pay in to reduce your house bond Agree.
From my Broker - Invest in Discovery "Something/Something" (Obviously he is a Discovery Broker) Stay the hell away from any so called broker/financial advisor, friend or not. They charge ridiculous fees and 90% of them don't beat the market anyway.
From a friend who works in finance - Pay half into your bond and invest the other half in high risk Allan Gray "Something" Maybe.
Very wealthy friend - buy Gold, Loads of coins and shares Partly agree - definitely buy a lot more shares than gold though.
Another wealthy friend - Invest in reliable long term shares or IT Agree.
Another wealthy friend - use full amount and buy a small rental unit in a complex Agree.
Another wealthy friend - put it into joint property venture in the UK Not sure.
Another wealthy friend - invest in "short-something" overseas currencies like the Yen? What? No.


First off, make sure you are debt free. After that, make sure you have an emergency fund that will last 3 to 6 months in case of redundancy/accident/hospitalization/etc. After that you can then start to invest.

You have to know what exactly you are investing for, time horizon and your risk appetite. I personally invest mostly in US stocks. Buying an index tracking ETF like a S&P500 tracker is easy, cheap, a good way to diversify and has historically given good returns (+- 10% p/year). Stocks have also historically outperformed gold. Gold should rather be used to hedge your portfolio during market downturns in my opinion.

The reason I say stay away from financial "advisors" is because a simple 1% or 2% management fee will massively eat away at your returns over the long term. As an example, if you invest R100 000 once off for 30 years at 10% return p/year then you will have R1 745 000 after year 30. At 9% p/year it will grow to R1 326 000 and at 8% to only R1 006 000. So a 1% fee would cost you over 400K and 2% over 700K! To top that all off, 9/10 brokers under perform the market anyway. Meanwhile, the Vanguard S&P500 ETF (VOO) has a management fee of only 0.04%.

Rental property is also a good passive investment, but has its own pro's and cons.

 

[newby_investor]

In b4 someone suggests cryptocurrency... ;-)

 

[SafariTin]

I started listening to the Fat Wallet podcast 2 or so years ago and it is the best financial advice I ever got. It is SA based, so relevant and it is independent, so unlike your broker they don't have any incentive to offer specific products or providers.

The home of money, investment and trading. Money in action.

How does the stock market work? What is a share? How do I make my first investment? Get all the answers for free on justonelap.com.

justonelap.com

Rule of thumb to get finances in order:

1. Have emergency fund (3-6 months expenses as per poster above)
2. Tax free savings (TFSA)
3. Pay off debt
4. Start investing (you SAVE with the intention to SPEND money in the future, you INVEST with the intention to EARN money in the future)

So my advice would be that IF you are disciplined enough not to make new debt as soon, then take what you need for the emergency fund and put it aside, then put the R36,000 you are allowed this year into the TFSA and put the rest in the bond (bonus would be if it is an access bond, then you could theoretically save the emergency fund money in there too).

 

[Snyper564]

I started listening to the Fat Wallet podcast 2 or so years ago and it is the best financial advice I ever got. It is SA based, so relevant and it is independent, so unlike your broker they don't have any incentive to offer specific products or providers.

The home of money, investment and trading. Money in action.

How does the stock market work? What is a share? How do I make my first investment? Get all the answers for free on justonelap.com.

justonelap.com

Rule of thumb to get finances in order:

1. Have emergency fund (3-6 months expenses as per poster above)
2. Tax free savings (TFSA)
3. Pay off debt
4. Start investing (you SAVE with the intention to SPEND money in the future, you INVEST with the intention to EARN money in the future)

So my advice would be that IF you are disciplined enough not to make new debt as soon, then take what you need for the emergency fund and put it aside, then put the R36,000 you are allowed this year into the TFSA and put the rest in the bond (bonus would be if it is an access bond, then you could theoretically save the emergency fund money in there too).

I would personally swap 2 and 3 with each other

 

[Thor]

I started listening to the Fat Wallet podcast 2 or so years ago and it is the best financial advice I ever got. It is SA based, so relevant and it is independent, so unlike your broker they don't have any incentive to offer specific products or providers.

The home of money, investment and trading. Money in action.

How does the stock market work? What is a share? How do I make my first investment? Get all the answers for free on justonelap.com.

justonelap.com

Rule of thumb to get finances in order:

1. Have emergency fund (3-6 months expenses as per poster above)
2. Tax free savings (TFSA)
3. Pay off debt
4. Start investing (you SAVE with the intention to SPEND money in the future, you INVEST with the intention to EARN money in the future)

So my advice would be that IF you are disciplined enough not to make new debt as soon, then take what you need for the emergency fund and put it aside, then put the R36,000 you are allowed this year into the TFSA and put the rest in the bond (bonus would be if it is an access bond, then you could theoretically save the emergency fund money in there too).

On the note of that emergency fund
A worth while read for supplemental value.

How to Build an Emergency Fund - Platinum Wealth

An emergency fund should be set up before you start investing. Use a 32 Day Notice Account + Credit Card if possible. Do not use a TFSA for emergencies, ever. Share your emergency fund strategy with us here. What Exactly Is an Emergency Fund? An emergency fund is simply money you’ve set aside...

platinumwealth.co.za

 

[ThatGuy_ZA]

This type of question will get you millions of answers, many of which are "right" but possibly not right for you.

If you are planning on staying in SA, I'd put half into your bond/debt and the rest in an offshore investment - have a look at the Allan Gray Offshore Platform options.

If you have even toying with the idea of leaving SA, get it out of the country ASAP and put it into a combination of funds mentioned above.

 

[SafariTin]

I would personally swap 2 and 3 with each other

I had also thought the same originally, but as you can only contribute R36,000 per year, I would not want to miss out on this year's allocation. (there is no way to catch up on this year's allocation next year or whenever all debt is paid off)

 

[zerocool2009]

I would personally make sure I max my TFSA within the 12 month (thinking past debt or RA's). But having an emergency fund (I agree, #1)

 

[AlmightyBender]

The only good financial advice you are going to get on the internet is: get a proper, professional, certified and independent financial advisor.

Have a look here as a starting point to find one:

FPI – The Financial Planning Institute of Southern Africa (FPI), a South African Qualifications Authority recognised professional association for financial planners in South Africa.

www.fpi.co.za

To be able to tell you the most optimum use of your inheritance there are so many variables that must be taken into account that are impossible to share on a forum like this. You need a proper and holistic plan for your life with life and investment goals that are aligned.

As said early in the thread, you MUST steer far clear of "advisors" and brokers that are contracted via commission to specific product providers. They are scum of the earth in that they pretend to be what they are not.

 

[Superman-7]

I personally would stay away from the property market right now.

First debt.

Then TFSA.

And then the rest is probably largely dependent on whether you have any plans to leave the country, and your risk appetite.

 

[maumau]

Just looking at the Allen Gray link above. Don't some of the banks have offshore savings facilities?

 

[Lindabro]

If I had inherited a large sum of money (say a Million) what would be the best thing to do long term?
Advice so far:
From the bank - pay in to reduce your house bond Agree.
From my Broker - Invest in Discovery "Something/Something" (Obviously he is a Discovery Broker) Stay the hell away from any so called broker/financial advisor, friend or not. They charge ridiculous fees and 90% of them don't beat the market anyway.
From a friend who works in finance - Pay half into your bond and invest the other half in high risk Allan Gray "Something" Maybe.
Very wealthy friend - buy Gold, Loads of coins and shares Partly agree - definitely buy a lot more shares than gold though.
Another wealthy friend - Invest in reliable long term shares or IT Agree.
Another wealthy friend - use full amount and buy a small rental unit in a complex Agree.
Another wealthy friend - put it into joint property venture in the UK Not sure.
Another wealthy friend - invest in "short-something" overseas currencies like the Yen? What? No.


First off, make sure you are debt free. After that, make sure you have an emergency fund that will last 3 to 6 months in case of redundancy/accident/hospitalization/etc. After that you can then start to invest.

You have to know what exactly you are investing for, time horizon and your risk appetite. I personally invest mostly in US stocks. Buying an index tracking ETF like a S&P500 tracker is easy, cheap, a good way to diversify and has historically given good returns (+- 10% p/year). Stocks have also historically outperformed gold. Gold should rather be used to hedge your portfolio during market downturns in my opinion.

The reason I say stay away from financial "advisors" is because a simple 1% or 2% management fee will massively eat away at your returns over the long term. As an example, if you invest R100 000 once off for 30 years at 10% return p/year then you will have R1 745 000 after year 30. At 9% p/year it will grow to R1 326 000 and at 8% to only R1 006 000. So a 1% fee would cost you over 400K and 2% over 700K! To top that all off, 9/10 brokers under perform the market anyway. Meanwhile, the Vanguard S&P500 ETF (VOO) has a management fee of only 0.04%.

Rental property is also a good passive investment, but has its own pro's and cons.

Thank you so much for your advice.

 

[Lindabro]

I started listening to the Fat Wallet podcast 2 or so years ago and it is the best financial advice I ever got. It is SA based, so relevant and it is independent, so unlike your broker they don't have any incentive to offer specific products or providers.

The home of money, investment and trading. Money in action.

How does the stock market work? What is a share? How do I make my first investment? Get all the answers for free on justonelap.com.

justonelap.com

Rule of thumb to get finances in order:

1. Have emergency fund (3-6 months expenses as per poster above)
2. Tax free savings (TFSA)
3. Pay off debt
4. Start investing (you SAVE with the intention to SPEND money in the future, you INVEST with the intention to EARN money in the future)

So my advice would be that IF you are disciplined enough not to make new debt as soon, then take what you need for the emergency fund and put it aside, then put the R36,000 you are allowed this year into the TFSA and put the rest in the bond (bonus would be if it is an access bond, then you could theoretically save the emergency fund money in there too).

Thank you. Excuse the ignorance, but where would I find a TFSA?

 

[Lindabro]

The only good financial advice you are going to get on the internet is: get a proper, professional, certified and independent financial advisor.

Have a look here as a starting point to find one:

FPI – The Financial Planning Institute of Southern Africa (FPI), a South African Qualifications Authority recognised professional association for financial planners in South Africa.

www.fpi.co.za

To be able to tell you the most optimum use of your inheritance there are so many variables that must be taken into account that are impossible to share on a forum like this. You need a proper and holistic plan for your life with life and investment goals that are aligned.

As said early in the thread, you MUST steer far clear of "advisors" and brokers that are contracted via commission to specific product providers. They are scum of the earth in that they pretend to be what they are not.

Thank you

 

[Lindabro]

If I had inherited a large sum of money (say a Million) what would be the best thing to do long term?
Advice so far:
From the bank - pay in to reduce your house bond Agree.
From my Broker - Invest in Discovery "Something/Something" (Obviously he is a Discovery Broker) Stay the hell away from any so called broker/financial advisor, friend or not. They charge ridiculous fees and 90% of them don't beat the market anyway.
From a friend who works in finance - Pay half into your bond and invest the other half in high risk Allan Gray "Something" Maybe.
Very wealthy friend - buy Gold, Loads of coins and shares Partly agree - definitely buy a lot more shares than gold though.
Another wealthy friend - Invest in reliable long term shares or IT Agree.
Another wealthy friend - use full amount and buy a small rental unit in a complex Agree.
Another wealthy friend - put it into joint property venture in the UK Not sure.
Another wealthy friend - invest in "short-something" overseas currencies like the Yen? What? No.


First off, make sure you are debt free. After that, make sure you have an emergency fund that will last 3 to 6 months in case of redundancy/accident/hospitalization/etc. After that you can then start to invest.

You have to know what exactly you are investing for, time horizon and your risk appetite. I personally invest mostly in US stocks. Buying an index tracking ETF like a S&P500 tracker is easy, cheap, a good way to diversify and has historically given good returns (+- 10% p/year). Stocks have also historically outperformed gold. Gold should rather be used to hedge your portfolio during market downturns in my opinion.

The reason I say stay away from financial "advisors" is because a simple 1% or 2% management fee will massively eat away at your returns over the long term. As an example, if you invest R100 000 once off for 30 years at 10% return p/year then you will have R1 745 000 after year 30. At 9% p/year it will grow to R1 326 000 and at 8% to only R1 006 000. So a 1% fee would cost you over 400K and 2% over 700K! To top that all off, 9/10 brokers under perform the market anyway. Meanwhile, the Vanguard S&P500 ETF (VOO) has a management fee of only 0.04%.

Rental property is also a good passive investment, but has its own pro's and cons.

Thank you very much. Had a look at the S&P500 tracker but then I have to trade and I am clueless financially. Have all of this covered:- First off, make sure you are debt free. After that, make sure you have an emergency fund that will last 3 to 6 months in case of redundancy/accident/hospitalization/etc. After that you can then start to invest.
But to invest I need to find a Broker of sorts?

 

[Lindabro]

Depends on your financial situation. Here is what I would do:

Scenario 1) If you live from month to month with little to no savings, I would keep the equivalent of 4 to 6 month's monthly household expenses in a "high" interest bearing money market account. Currently most banks offer anything between 3% and 4% and if you can get more from places like Tyme bank (but it does have some T's & C's to consider). The rest I would deposit into my bond. Prime rate is currently 7% and your mortgage interest rate may be anything between 7% and 10% depending on the rate that the bank gave you. Very few risk free investments at the moment will give you a post tax return of 7 to 10%.

Scenario 2) If you have some savings and your debt is under control, I would invest either in some or other offshore investment via an ETF or unit trust. So you have the possibility of dual growth on your funds via the increase in the value of the underlying company's shares as well as forex hedging should the Rand devalue against the Dollar/Pound/Euro/Yen. Some of these unit trusts like Sygnia's Fourth Industrial Revolution Fund has returned gains in excess of 15% year on year.

Scenario 3) You are money's boss, you have so much that you don't know what to do with it. Take the funds offshore and invest it in high risk shares like Telsa.

Thank you.... I would fall into Point 2, but do not understand most of what you are suggesting or how I would go about doing any of it?

 

[Sideshow Bob]

Thank you.... I would fall into Point 2, but do not understand most of what you are suggesting or how I would go about doing any of it?

When he suggested " Sygnia's Fourth Industrial Revolution Fund ", you could google it to see where it takes you. Hint - it is most likely the first link.